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Ford Motor Co. gets credit rating upgrade

October 21, 2011 | 9:02
am

Ford Motor Co. is knocking on the door of an investment-grade corporate credit rating.

Standard & Poor's Ratings Services raised its corporate credit rating on Ford Motor Co. and Ford Motor Credit Co. — the automaker’s lending arm — to 'BB+' from 'BB-.' That puts the company just one notch below an investment-grade rating, which is an important measure of corporate health and would reduce the automaker’s borrowing expenses.

Ford's “new four-year labor contract with the United Auto Workers has been ratified; we believe the contract will allow for continued profitability and cash generation in North America. Ford has a two-year track record of profits and cash-flow generation in its global automotive operations, supported by strong performance in North America,” the rating service said in its upgrade.

The nation’s No. 2 carmaker said the new contract will increase its labor costs by less than 1% a year and that it will pay for the deal by increasing efficiency at its factories and hiring new workers at lower wages.

Ford shares rose 47 cents, or 4%, to $12.17 in midday trading.

In its second-quarter earnings report earlier this year, Ford said it decreased its debt to $14 billion, shaving $2.6 billion from the previous quarter. The company borrowed heavily in 2006 to restructure operations, a move that helped it avoid the bankruptcies and federal government bailouts that saved General Motors Co. and Chrysler Group.